Indian Budget 2024
4 min read | Updated on January 29, 2024, 12:49 IST
SUMMARY
India's aviation sector is growing rapidly, but its Maintenance, Repair & Operation (MRO) capabilities remain underdeveloped, comprising only 2.5% of the global market. With a $1.3 billion annual expenditure on overseas MRO services, there's a significant untapped economic opportunity. The 2024 interim budget offers a chance to boost the Indian MRO industry through streamlined regulations, financial incentives, reduced airport charges, and investments in infrastructure and skill development. Success hinges on collaboration among stakeholders.
Indian aviation is projected to grow at a CAGR of 6.3% over the next two decades, surpassing the 4.9 per cent growth rate for the rest of Asia.
This dependence on foreign entities not only represents a missed economic opportunity but also raises the red flag on operational efficiency and aircraft grounding times.
The upcoming 2024 interim budget presents a timely opportunity to further propel the Indian MRO industry towards its true potential.
The current regulatory environment can be cumbersome and time-consuming, discouraging foreign investment and MRO expansion. The budget can introduce measures to simplify and expedite regulatory approvals, particularly for new entrants and technological advancements. This could involve streamlining license issuance procedures, establishing clear guidelines for foreign direct investment (FDI), and promoting transparency in regulatory processes.
Attracting long-term investments to fund infrastructure development and capacity expansion is crucial for sustained growth. The budget can offer tax breaks, grants, and subsidies for MRO companies, particularly those specializing in niche areas like engine or component overhaul. More importantly, providing access to low-cost financing options through dedicated credit lines or specialized financial institutions can address the immediate capital needs of the sector.
The high cost of MRO space in Indian airports, particularly in Kochi and Juhu, remains a major hurdle. The budget should introduce measures to reduce royalties and additional charges levied on MRO facilities, making them more competitive with overseas options. This could involve offering tax breaks, concessions, or establishing dedicated MRO zones with lower operational costs.
The current practice of imposing IGST on components sent for repair abroad upon their return to India creates unnecessary costs and complexity. The budget should explore revising this policy or offering exemptions for repaired components, aligning it with international MRO practices.
Existing MRO infrastructure in India requires upgrades to cater to larger and more complex aircraft. The budget should allocate funds for developing dedicated MRO facilities with adequate hangars, equipment, and testing facilities. Public-private partnerships (PPPs) can be leveraged to attract investments and expedite infrastructure development.
The Indian MRO sector suffers from a significant shortage of qualified technicians and engineers with expertise in diverse aircraft types. The budget can allocate targeted funds for establishing specialized training institutes, promoting industry-academia collaboration, and incentivizing skill development programs. Additionally, recognizing international certifications and facilitating knowledge exchange with global MRO players can further bridge the skill gap.
The promising Indian aviation sector presents a unique opportunity to capture a significant share of the global MRO market. By implementing policy reforms and making strategic investments, the government can foster a conducive ecosystem that attracts investments, enhances capabilities, and positions India as a competitive MRO hub.
The success of these initiatives hinges not only on budgetary allocations but also on collaborative efforts between industry stakeholders, policymakers, and educational institutions. This is a future within our reach, and the 2024 interim budget can be the first step towards making it a reality.
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